“Overpaid” PI lawyers could make a living on much lower fees, MPs told

By Legal Futures

19 July 2011

Westminster: lawyers' fees under fire

Lawyers are overpaid for cases run through the road traffic accident claims portal and should be able to make a living from a far lower level of fee, MPs were told last week.

Giving evidence to the committee scrutinising the Legal Aid, Sentencing and Punishment of Offenders Bill, Nick Starling from the Association of British Insurers suggested that if referral fees were banned, the £1,200 solicitors receive for portal cases could be reduced substantially.

Mr Starling said: “It is worth people’s while to pay an £800 referral fee to get a £1,200 fee for an RTA… you can do a simple bit of arithmetic that works out what a more appropriate fee might be.”

He continued: “There is a similar situation in Germany, where the fee is around €300 or €400 (£260 or £350). It is much higher in the UK than in other countries. I am not here to dictate what that fee should be. I am just saying that there is scope for it to be much lower. That is a symbol of success.

“The portal has been a huge success. It has sped up the claims below £10,000. Sometimes, they are dealt with in hours rather than days or weeks. The amount of input that is needed does not need that sort of fee to sustain it. If lawyers are not having to pay the referral fee to get the business, they should still be able to make a decent living out of it.”

Mr Starling – the director of general insurance and health – also called for action over the “£2 billion cost of whiplash claims”. He said: “One in 140 people in this country make a whiplash claim every year. I do not believe that people in this country have the weakest necks in Europe; it is simply inconceivable.”

The committee simultaneously took evidence from Muiris Lyons, immediate past president of the Association of Personal Injury Lawyers and a clinical negligence specialist, and Catherine Hopkins, legal director of Action Against Medical Accidents. Both argued hard against the impact of the Jackson reforms – and particularly the end of recoverability – on clinical negligence.

Pressed by Conservative MP Damian Hinds on the existence of a compensation culture, Mr Lyons said: “In his report, Lord Young recognised that, with the prevailing advertising, there was a perception of a compensation culture. But, broadly speaking, the figures show that claims are falling, not going up…

“If there are concerns about [personal injury] advertising and referral fees, fine – address them directly. Taking a quarter of an injured innocent claimant’s damages is not the way to do it, nor is withdrawing legal aid from some of society’s most vulnerable people.”

Mr Starling said insurers’ support for the Jackson reforms was targeted at low-value claims, not catastrophic injury cases. “By definition, they are have to be dealt with over a long period of time, they cost a lot of money – the legal fees are much more proportionate to the amount awarded – and that is a slightly separate issue for our members,” he said.

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Last month, MPs on the justice select committee asked minister Lord Keen what would happen when the government went ahead with its plan to raise the small claims limit for personal injury claims (from £1,000 to £5,000 for road traffic related claims and to £2,000 for everything else). As it is a jurisdiction in which lawyers do not generally operate – because legal costs are not recoverable – who might help claimants navigate what can still be a complex process? His answer, surprisingly, was claims management companies.